The Fixer: Payday loan alternatives

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The Fixer logo Have you been left out of pocket due to poor service or sharp practice? Do you have a money problem that won't go away?

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Dear Fixer,
Over the past year or so, I have taken out short-term Wonga loans a couple of times when money has been tight.

I've paid the loans back in full within the time limit on both occasions and have had no further problems, so as we're coming up to an expensive time of year, I was thinking about taking another one out.

Then I saw all the bad press that payday loans have been getting recently, and started to wonder if there wasn't another way to borrow a bit of money at a lower interest rate.

I will probably need a bit of extra cash again in December to cover the cost of our family Christmas, but I don't think I will qualify for a credit card, for example.

Can you suggest any alternatives to taking out another payday loan?

S Ford, London

Dear Mr Ford,

While payday loans are one way to fix a short-term cash flow crisis, they remain an expensive way to borrow (especially for those who find themselves unable to pay them off within the 30-day term).

They can also affect your ability to use mainstream lenders in the future, which is one reason they have been hitting the headlines recently.

There are reports of mortgage lenders declining applications due to people taking out payday loans in the past, even if the loans were repaid in full the following month, due to concerns abut the person living beyond his or her means.

Avoiding taking out another payday loan is therefore a good idea - especially when there are much cheaper alternatives, even for people with poor credit scores.

These include moving to a current account provider that offers a 0% overdraft for new customers. For example, as long as you can pay £1,000 a month into Nationwide's FlexDirect account, you should qualify for a 12-month 0% overdraft facility.

A low-cost loan from your local credit union is another option that is definitely worth considering.

And there are even credit cards for people with bad credit records, such as the Aqua Classic card that allows you to borrow between £100 and £1,600 at a representative APR of 29.7%.

Whatever option you choose, just remember to try to keep a lid on your spending and pay off any debts that you are being charged interest on as quickly as possible.

The Fixer

Whatever your financial problem, write to themoneyfixer@aim.com and The AOL Money Fixer will get on the case.